Reliance net dips 21% to Rs 4,470 cr but beats estimates

Reliance Industries, the country's largest private sector conglomerate, reported a 21 percent decline in profit after tax at Rs 4470 crore percent on year-year-year basis while the sales are up 13.4 percent at Rs 91,875 crore against Rs 81,081 crore in the year-ago period even though the company struggled to beat a falling gas output from the Krishna Godavari Basin.

The company's net profit beat expecations, as most analysts had expected the company to report a profit after tax of Rs 4375 crore. Its sales stood at Rs 91,875 crore, compared with an estimate of Rs 87,500 crore as refining margins fell less than expected and treasury gains from its huge cash pile bolstered profits.

Gross refining margin, a key measure of profitability for oil refiners, was $7.6x/barrel, as against $10.3 per barrel on a year-on-year basis, but remained unchanged on a sequential basis.

GRM is the difference between the cost of crude and the price of refined products.

This is the third consecutive quarter of decline in net profit for the company.

The company's operating profit margins stood at 6747 crore against Rs 9929 crore year-on-year.

Other income during the quarter was up 76.6 percent at Rs 1904 crore against Rs 1,078 crore on a year-on year basis, which means there is improvement in the company's core business. However, it is down 17 percent from the March quarter.

The company's oil and gas revenue declined to Rs 2508 crore from Rs 3894 crore in the year-ago period, down 35.6 percent. On a quarterly basis, the revenue is down 3.9 percent.

Revenue from the petrochemicals business is up 18.6 percent at Rs 21839 in the June quarter from Rs 18366 in the year-ago period.

Revenues from refining, RIL's core business increased 12 percent quarter-on-quarter to Rs 85,383 crore, while it is up 15.9 percent year-on-year. Reliance's Q1 refining margins came at 11.7 percent.

The exports for the first quarter were reported at $9.8 billion

In a pre-earnings note, Enam said other income is likely to offset lower D6 and weak margins, supporting the company's earnings.

At its annual general meeting earlier this year, RIL chairman Mukesh Ambani admitted disappointment over the gas output from KG-D6 block, but remained upbeat in front of shareholders.


Bank of America Merill Lynch had said it expects the company's earnings to deteriorate in FY13.

"Our concern is that global economic downturn may hit RIL's GRM and petrochem margins. Thus, the company's earnings may deteriorate in FY13. Weakness in refining and petrochemicals was already visible in 2H FY12," it said.

It believes an improvement in outlook is likely only if GRM from coke gasification rises, fundamentals better, gas price increases, petrochemical capacity expands and gas output recovers.

However,Nomura upgraded RIL to buy with a target price of Rs860 as the brokerage believes that the worst in E&P is priced in already. It expect earnings growth to resume, aided by a weak currency and petrochemical expansion.

The company's cash balance rose from Rs 702 crore to Rs 707 crore at the end of the June quarter.

Shares of RIL closed 0.70 percent lower at Rs 722.65.

Q1 RIL FY 1213 Media Release